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  • IPO Watch
  • china tech
  • disruptive innovation
  • electric vehicles

Li Auto stock stalls ahead of Hong Kong IPO

Li Auto [LI] stock zoomed higher last week before putting on the brakes, after becoming the latest US-listed Chinese company to reveal it will dual list in its home market. The electric vehicle maker will follow in the slipstream of rival XPeng [XPEV], after raising $1.5bn (HK$11.8bn) in a stock offering in Hong Kong.

Founded in 2015, the Beijing startup raised $1.3bn through its Nasdaq listing in July last year, and issued 100m shares in its Hong Kong IPO at a price of HK$118 per share, it was confirmed on Friday.

As well as appealing to new investors, US-traded Chinese companies are increasingly moving to listings in Hong Kong as a hedge against the risk of being delisted from US exchanges, reports Bloomberg, amid increasing scrutiny from Beijing and Washington.

$1.3billion

Amount raised by Li Auto in IPO last year

  

How did US-listed Li Auto stock react to the news?

The Nasdaq-listed Li Auto stock initially drove higher, to $35.44 in intraday trading Monday last week, up 6.14% from Friday 30 Julys close – and 18.53% from Fridays intraday low of $29.90. However, Li Autos American depositary receipt shares (ADR) pulled back from those initial gains, closing the week down 9.10% at $30.35.

Li Auto stock is down 5.25% across the last month, giving the company a market cap of $31.14bn. However, since its US stock market debut, the shares are up 89 69%, riding the wave of a global rally in EV stocks.

 

Li Auto stock to take primary listing route

Li Auto is following fellow XPeng in obtaining a dual primary listing rather than a secondary one, which means it has to follow Hong Kong disclosure and corporate-governance standards more closely, report the Wall Street Journal. It also allows Li Auto to list in Hong Kong earlier – its scheduled to start trading on 12 August under the stock code 2015 – and enables Li Auto stock transactions by mainland China investors.

The EV maker said it would offer up to 10m shares to investors in Hong Kong and 90m shares to global investors, and plans to use the net IPO proceeds on research and development on fast-charging and autonomous driving technologies, expanding its retail stores and marketing, reports the South China Morning Post (SCMP).

 

How have XPengs listings performed?

Li Autos Hong Kong listing follows closely on the heels of its larger rival XPeng, which completed a dual primary listing in June, raising $2.1bn, according to Bloomberg. Since it listed on the New York Stock Exchange last August, Xpengs ADR listing is up 80.87% to $41.22, as at Friday 6 Augusts close. Most of those gains were last year, with the stock down 6.53% year-to-date, and falling 3.01% last week.

In comparison, XPengs [9868] Hong Kong shares are up 8 28% since launching a month ago, and unlike in the US, the stock has recorded a positive week, up 5.44% to HK$168.70 at last weeks close.

“For China's EV start-ups like XPeng and Li Auto, monthly sales of 10,000 units will be a meaningful threshold to target because after exceeding that level, a carmaker will be viewed as a powerful player in the automotive industry” - Gao Shen

 

Chinas booming EV market bodes well for Li Auto stock

The Hong Kong IPO comes after Li Auto and XPeng reported record monthly deliveries for July, on surging sales in the world's largest EV market. Li Auto sold 8,589 of its Li One sports utility vehicles (SUVs) – its only EV launched to date – a jump of 251.3% year-on-year and 11.4% higher compared with June, reports the SCMP. However, Li Auto is still yet to make a profit, recording a net loss of $54.9m in the first three months of this year, on revenue of $546m.

"For China's EV start-ups like XPeng and Li Auto, monthly sales of 10,000 units will be a meaningful threshold to target because after exceeding that level, a carmaker will be viewed as a powerful player in the automotive industry," said independent analyst Gao Shen.

The consensus outlook on the Nasdaq-listed Li Auto stock reflects Shens positive take. Among the 17 analysts offering 12-month price forecasts on CNN the median estimate is $40.02, representing a 31.86% increase from last weeks close at $30.35. With 14 ‘buy’ and three ‘hold’ ratings, the stock is a firm ‘buy’.

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